[Federal Register Volume 65, Number 108 (Monday, June 5, 2000)]
[Notices]
[Pages 35693-35694]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-13957]



[[Page 35693]]

-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-42831; File No. SR-NASD-00-16]


Self Regulatory Organizations; Notice of Filing of Proposed Rule 
Change by the National Association of Securities Dealers, Inc. Relating 
to Amendments to Minimum Listing Requirements for the Inclusion and 
Maintenance of Open and Closed-End Funds in Nasdaq's Mutual Fund 
Quotation Service

May 25, 2000.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''), \1\ and Rule 19b-4 thereunder, \2\ notice is hereby given 
that on April 4, 2000, the National Association of Securities Dealers, 
Inc. (``NASD'') through its wholly owned subsidiary The Nasdaq Stock 
Market, Inc. (``Nasdaq'') file with the Securities and Exchange 
Commission (``SEC'' or ``Commission'') the proposed rule change 
described in Items I, II, and III below, which Items have been prepared 
by Nasdaq.\3\ On May 16, 2000, the Nasdaq submitted Amendment No. 2 to 
the proposed rule change.\4\ The Commission is publishing this notice 
to solicit comments on the proposed rule change from interested 
persons.

I. Self-Regulatory Organization's Statement of the Terms of 
Substance of the Proposed Rule Change

    Nasdaq is proposing to amend NASD Rule 6800 regarding the minimum 
listing requirements for the inclusion and maintenance of open and 
closed-end funds in Nasdaq's Mutual Fund Quotation Service (``MFQS'') 
Proposed new language is in italics; proposed deletions are in 
brackets.
* * * * *
6800. MUTUAL FUND QUOTATION SERVICE
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ The NASD filed its proposed rule change on March 31, 2000. 
On April 4, 2000, the NASD filed Amendment No. 1 that entirely 
replaced the original rule filing.
    \4\ See Letter from Robert E. Abner, General Counsel and Senior 
Vice President, Nasdaq, to Katherine A. England, Assistant Director, 
Division of Market Regulation (``Division''), Commission (May 16, 
2000). Amendment No. 2 corrected a typographical error that appeared 
in the proposed rule language and clarified that the Mutual Fund 
Quotation Service includes only 73.8% of the total open-end and 
closed-end fund population.
---------------------------------------------------------------------------

    (a)-(b) No Change
    (c) News Media Lists
    (1) (A) An eligible open end fund shall be authorized for inclusion 
in the News Media List released by the Association if it has at least 
1,000 shareholders or $25 million in net assets.
    (B) An eligible closed-end funds shall be authorized for inclusion 
in the News Media List released by the Association if it has at least 
$60 [100] million in net assets.
    (C) Compliance with subparagraphs (1)(A) and (B) shall be certified 
by the fund to the Association at the time of initial application for 
inclusion in the List.
    (2) (A) An authorized open-end fund shall remain included in the 
New Media List if it has either 750 shareholders or $15 million in net 
assets.
    (B) An authorized closed-end fund shall remain included in the News 
Media List if it has $30 [60] million in net assets.
    (C) Compliance with subparagraphs (2)(A) and (B) shall be certified 
to the Association upon written request by the Association.
    (d) Supplemental List
    An eligible open-end or closed-end fund shall be authorized for 
inclusion in the Supplemental List released to vendors of Nasdaq Level 
I Service if it meets one of the criteria set out in subparagraph (1), 
subparagraph (2), or subparagraph (3) below:
    (1) the fund has net assets of $10 million or more; or
    (2) the fund has had two full years of operation; or
    (3) the investment management firm managing the fund has:
    (A) at least one other fund listed on the Mutual Fund Quotation 
Service that has net assets of $10 million or more; and
    (B) at least $15 million in total assets of open-end, closed-end, 
and/or money-market funds under management.
    (e) No Change
* * * * *

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis For, the Proposed Rule Change

    In its filing with the Commission, the NASD included statements 
concerning the purpose of, and basis for, the proposed rule change and 
discussed any comments it received on the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item IV below. The NASD has prepared summaries, set forth in Sections 
A, B, and C below, of the most significant aspects of such statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    Nasdaq is proposing to amend NASD Rule 6800 regarding the minimum 
listing requirements for the inclusion and maintenance of open and 
closed-end funds in the Service. The MFQS was created to collect daily 
price and related data for mutual funds and money market funds and to 
disseminate that information to the news media and market data 
vendors.\5\ Currently, the MFQS disseminates the valuation data for 
over 11,000 funds. This information dissemination process is 
facilitated by the use of web browser-based technology, which enables 
funds included in the Service, or the pricing agents designated by such 
funds, to transmit directly to Nasdaq a multitude of pricing 
information, including information about a fund's net asset value, 
offer price, and closing market price.
---------------------------------------------------------------------------

    \5\ See Securities Exchange Act Release No. 22264 (July 23, 
1985), 50 FR 30899 (July 29, 1985).
---------------------------------------------------------------------------

    Funds must meet minimum eligibility criteria in order to be 
included in the MFQS.\6\ The MFQS has two ``lists'' in which a fund may 
be included--the News Media List and the Supplemental List--and each 
list has its own initial inclusion requirements.\7\ The News Media List 
also has maintenance/combined inclusion requirements. If a fund 
qualifies for the News Media List, pricing information about the fund 
is eligible for inclusion in the fund tables of newspapers and is also 
eligible for dissemination over Nasdaq's Level 1 Service, which is 
distributed by market data vendors.\8\ if a fund qualifies for the 
Supplemental List, the pricing information about that fund generally is 
not included in newspaper fund tables, but is disseminated over 
Nasdaq's Level 1 Service. The Supplemental List thus provides 
significant visibility for funds that do not otherwise qualify for 
inclusion in the News Media List. Each fund incurs an annual fee for 
inclusion in the Service.\9\
---------------------------------------------------------------------------

    \6\ See NASD Rule 6800.
    \7\ See id.
    \8\ See NASD Rule 7010.
    \9\ See NASD Rule 7090.
---------------------------------------------------------------------------

    Nasdaq maintains that the Service provides valuable pricing 
information for a large portion of funds for which there is significant 
investor interest. According to Investment Company Institute (``ICI'') 
data, however, the MFQS is currently only capturing

[[Page 35694]]

pricing information for approximately 73.8% of the total fund 
population.\10\
---------------------------------------------------------------------------

    \10\ See Amendment No. 2, supra note 4.
---------------------------------------------------------------------------

    In light of the foregoing, Nasdaq proposes to amend the MFQS 
inclusion criteria for both the Supplemental and News Media List by 
expanding the universe of funds that are eligible for inclusion in the 
Service. Nasdaq proposes to lower both the initial and maintenance 
requirements for closed-end funds to participate in the News Media 
List. Currently, in order to qualify initially for inclusion in the 
News Media List, a closed-end fund must have at least $100 million in 
net assets. To remain in the News Media List, a closed-end fund must 
maintain at least $60 million in net assets. The proposed rule change 
would lower the net asset requirement for a closed-end fund to qualify 
initially for inclusion in the News Media List to at least $60 million 
in net assets. The net asset requirement for a closed-end fund to 
remain included in the New Media List would be lowered to at least $30 
million.
    Nasdaq also proposes to amend the inclusion criteria for the 
Supplemental List. At the present time, an open-end or closed-end fund 
qualifies for inclusion in the Supplemental List if the fund either has 
at least $10 million in net assets or has had two full years of 
operation. Nasdaq proposes to provide a third alternative means for a 
fund to be included in the Service. Under this alternative, a fund 
would qualify for the MFQS if the investment firm that manages the fund 
has at least one other fund listed on MFQS that has $10 million in 
assets. In addition, the firm must have at least $15 million from open-
end, closed-end, and/or money market funds under management. Nasdaq 
notes that managed assets from other sources--such as pension funds--
would not be included for purposes of determining whether the 
investment firm meets the requirement that it manage at least $15 
million in fund-related assets.
    Nasdaq represents that the proposed rule change would provide daily 
pricing information to the investing public for funds that have a 
significant investor interest. In addition, Nasdaq estimates that 2,500 
of the 2,800 funds that are not currently eligible for inclusion in the 
MFQS would qualify under the proposed new standards.
2. Statutory Basis
    Nasdaq believes that the proposed rule change is consistent with 
the provisions of Section 15A(b)(6)\11\ and Section 11A \12\ of the 
Act. Section 15A(b)(6) \13\ of the Act requires the rules of a 
registered national securities association to foster cooperation and 
coordination with persons engaged in processing information with 
respect to securities, to remove impediments to and perfect the 
mechanism of a free and open market and a national market system, and, 
in general, to protect investors and the public interest. In Section 
11A(a)(1)(C), \14\ the Congress found that it is in the public interest 
and appropriate for the protection of investors and the maintenance of 
fair and orderly markets to assure the availability to brokers, 
dealers, and investors of information with respect to quotations and 
transactions in securities.
---------------------------------------------------------------------------

    \11\ 15 U.S.C. 78o-3(b)(6).
    \12\ 15 U.S.C. 78k-1.
    \13\ 15 U.S.C. 78o-3(b)(6).
    \14\ 15 U.S.C. 78k-1(a)(1)(C).
---------------------------------------------------------------------------

    Nasdaq believes that the proposed rule change is consistent with 
the provisions of Sections 15A(b)(6)\15\ and 11A(a)(1)(C) \16\ of the 
Act because it protects investors and the public interest by promoting 
better processing of fund pricing information. Nasdaq represents that 
the proposed new listing criteria will provide greater transparency to 
the markets by providing pricing information for a broader base of 
funds for which there is significant investor interest. Nasdaq believes 
that by providing listed status only to bona fide investment companies 
with a sufficient investor base and trading interest, the proposed new 
listing standards will serve as a means for the marketplace to screen 
issuers and maintain fair and orderly markets.
---------------------------------------------------------------------------

    \15\ 15 U.S.C. 78o-3(b)(6).
    \16\ 15 U.S.C. 78k-1(a)(1)(C).
---------------------------------------------------------------------------

B. Self-Regulatory Organization's Statement on Burden on Competition

    Nasdaq does not believe that the proposed rule change will impose 
any burden on competition that is not necessary or appropriate in 
furtherance of the purposes of the Act.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    Nasdaq did not solicit or receive written comments on the proposed 
rule change.

III. Date of Effectiveness of the Proposed Rule Change and Timing 
for Commission Action

    Within 35 days of the date of publication of this notice in the 
Federal Register or within such longer period (i) as the Commission may 
designate up to 90 days of such date if it finds such longer period to 
be appropriate and publishes its reasons for so finding or (ii) as to 
which the Exchange consents, the Commission will:
    (A) by order approve such proposed rule change, or
    (B) institute proceedings to determine whether the proposed rule 
change should be disapproved.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Persons making written submissions 
should file six copies thereof with the Secretary, Securities and 
Exchange Commission, 450 Fifth Street, NW., Washington, DC 20549-0609. 
Copies of the submission, all subsequent amendments, all written 
statements with respect to the proposed rule change that are filed with 
the Commission, and all written communications relating to the proposed 
rule change between the Commission and any person, other than those 
that may be withheld from the public in accordance with the provisions 
of 5 U.S.C. 552, will be available for inspection and copying at the 
Commission's Public Reference Room. Copies of such filing will also be 
available for inspection and copying at the principal office of the 
NASD. All submissions should refer to File No. SR-NASD-00-16 and should 
be submitted by June 26, 2000.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\17\
---------------------------------------------------------------------------

    \17\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 00-13957 Filed 6-2-00; 8:45 am]
BILLING CODE 8010-01-M